Wall Street reacts that way, too. If you want to trace virtually every stupid risk, every trend that's turned the markets into a casino, every root cause for the meltdown that nearly imploded the global economy, just follow the tyrannical path of the five sweetest letters on Wall Street: the almighty bonus.

Europe, collectively, seems to understand this. On Wednesday, the European Parliament voted overwhelmingly, 625-28, to limit to 30 percent the amount of a bonus that can be paid in cash. The rest of the loot, pending a rubber stamp from the Continent's finance ministers next week, will essentially be deferred over three years, to ensure that the risks taken to get the bonus don't subsequently blow up the bank or the economy.

Yet on this side of the pond, we seem to be entirely unwilling to address the destructive nature of the bonus system head-on. The tepid financial reform package that continues to weakly stumble through Congress doesn't tackle the topic directly. And while the Federal Reserve issued guidelines last month that make it clear it agrees with the actions in Europe, its enforcement boils down to vague threats about vetoing compensation plans that don't meet "standards."

The obscene numbers don't make the Wall Street bonus system destructive. Paying a 25-year-old commodities trader $20 million a year is no more inherently stupid or illogical than paying 25-year-old LeBron James $20 million. It's how bonuses get paid.

At a typical Wall Street bank, 80 or 90 percent of annual compensation arrives in one giant check, generally determined before Christmas and then paid in February. All that pent-up uncertainty—a "bonus," by definition, is discretionary—creates paranoia pretty much all year. For those on the lower rungs, each bank and fund has compensation committees that divide the loot by group based on how the firm did overall, and how much each unit contributed to it, and then the head of each desk, like a mafia boss, divided the spoils among his crew, based on individual performance and other intangibles. While I was making calls for my book, The Zeroes, one manager, who determines the bonuses of a few dozen traders, put it to me this way: "I have some guys who work for me, who I take $50,000 from just because I think they're a dick."

So much money. All in one check. All dependent on how much you make managing other people's money. This warped system corrupts even good people. "If I'm going to get paid zero," another money manager told me about his autumn mindset during down years, "I might as well take some risk and try to make some money." The only risk to his bonus, in other words, is not taking risk. A dangerous way to think when you can borrow roughly 20 times the amount of your initial bet to really raise the stakes.

In this system, long-term performance is irrelevant. Bonuses deal with the year at hand, and if that means buying or selling junk that explodes later, that hasn't been an issue. "All you worried about was whether you could sell it," says one Wall Street sales executive, describing the attitude pre-meltdown. Wall Street's musical chairs meant you'd be at another firm, or somewhere else in your current firm, when the song stopped. And stop it did.

Why does our country tip-toe around this problem, while Europe hits it over the head with a hammer? A lot of it has to do with entitlement. Try to muck with a Wall Streeter's bonus, and you'll get a reaction similar to what you'd hear after telling a 70-year-old you'd like to reform Social Security. No matter that bonuses are a recent phenomenon. Until 1971, almost every single major bank was a private partnership. At the end of the year, the partners simply divided the profits among themselves; the vast majority of employees got regular paychecks like schoolteachers and firemen and other normal working people. Only once the big banks went public—and faced shareholder pressure for consistent bottom-line performance—did the talent demand fat checks at year-end.

There's also something slightly un-American about the idea of capping salaries. And rightly so. But what Europe is launching isn't a cap; it's just a glorified escrow account. And banks are different. When a hedge fund blows up, whether Amaranth or Madoff, it makes headlines, but really only affects the rich people or institutions that willingly chose to invest or deal with them. Ever since the bone-headed repeal of Glass-Steagall, and the ensuing co-mingling of the Jimmy Stewart/It's a Wonderful Life bank ideal with the Al Pacino/Dog Day Afternoon version, the risky casino half of the bank can take out the essential deposits-and-loans side. (See Lehman Brothers, Bear Stearns, and Merrill Lynch.) That's why the way bankers get paid affects all of us. America generally leads on this kind of stuff—for once, it's time to follow.

Randall Lane is editor-in-large at The Daily Beast. This article originally appeared at The Daily Beast and was republished here with permission.